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India too should be working towards widening contact with Taiwan by exploring a free trade agreement, says former national security adviser Shivshankar Menon, who is a former ambassador to China. Given Taiwan’s manufacturing prowess, especially in high-end mobile phone components, this would immediately give a boost to the Narendra Modi government’s production-linked incentive (PLI) schemes. Many Taiwanese giants such as Hon Hai’s Foxconn and Pegatron are already participating. As with most import substitution-led industrial policies dreamt up in New Delhi, however, the risk is that the complexity of managing raw material costs inflated by duties on imported components will handicap India’s chances to be a global supplier. The competitive global mobile phone manufacturing business is already dominated by China and Vietnam.
Taipei financially supporting its companies to facilitate a move out of China, he underlines the importance of its SMEs shifting to India. Lo points out that 98% of companies in Taiwan are SMEs and 70% of the jobs are produced by them. Lo says that Taiwan’s investment has disproportionately gone to Vietnam, Thailand and Cambodia, but observes, “Taiwan and India are natural partners not just in security aspects, but also in building a political relationship."
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